The Research On Performances Of M&A By Foreign-capital To Listed Companies In China

In recent years, the activities of M&A by foreign-capital to domesticlisted companies are increasingly active, the size and influence of M&Aare also growing. It has a very important practical significance to drawgeneral conclusions of the impact on the performance of foreign mergersand acquisitions through this research. In this research, we use twomethods: one is Event Study Methodology (Cumulative AverageAbnormal Return method) for short-term research; the other isAccounting Research Methodology (Financial Ratios Analysis) forlong-term research.It aims to research28domestic listed companies from1999to2008.The used methods are Cumulative Average Abnormal Return (CAAR)method and Financial Ratios Analysis (FRA) method. CAAR methodstudies the short-term stock market performance, and the study period is30trading days before and after M&A event. FRA method studies thelong-term financial performances, and the study period is from one year before to two years after M&A event. The research results are: first,CAAR of the sample companies after M&A events are significantlyhigher than that before M&A events, it means M&A improved theshort-term performance of sample companies; second, the post-mergerfinancial results show positive returns, it means M&A improved thelong-term performance of sample companies. Therefore, M&A by foreigncapital have brought in the short term and long-term performanceimprovement to sample companies.In order to further take the advantage of M&A by foreign capital andeliminate the potential risk, we need propose reasonable advices to thegovernment and enterprises. Government should establish a sound legalsystem on M&A by foreign capital, strengthen the audit and guidancefunctions, develop the equity market and improve M&A environment.Domestic enterprises should be aware of their own value, strategic chooseforeign M&A partners, introduce competition mechanism, focus on thepost-merger integration and prevent speculation through M&A.